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Give and take

John McFall looks beyond the spin to consider the real impact of Osborne’s latest budget

Forget about the man with a long-term economic plan. Instead we have in George Osborne a Chancellor with a cunning long-term political plan, the aim of which is to deeply and permanently slash the size of the state.

All of this will be done under the cloak of a ‘One-Nation Conservative’ mantra that supposedly supports working people. So much for the rhetoric. The reality of course, is far different as it is those very same working people who will bear the brunt of the more pernicious aspects of yesterday’s budget.

For a start, according to the Office of Budget Responsibility (OBR), 430,000 public sector workers jobs will vanish. Job losses that the Chancellor believes will be made up for over time by private sector job growth.

This is a redistributive budget alright – raising £47bn in taxes whilst simultaneously stripping back the same amount from public spending. And the budget's rabbit out of the hat, the so-called National Living Wage is nothing of the sort. The Living Wage is calculated according to cost of living, whereas the Low Pay Commission (LPC) calculates a rate according to what the market can bear. Without a remit change for the LPC, this is effectively nothing more than a higher National Minimum Wage (NMW) – a rebranding coated with political spin.

Undoubtedly the ‘losers’, to use the Chancellor's favourite phrase, will be the hard working low and middle income earners. Take the case of a lone parent with two children who gains just over £400 as a result of wage increases. So far, so good. But the same individual also loses £860 from the tax credit changes. That’s a tough price to pay for aspiration.

There is also very little in this budget to tackle the chronic problems of low productivity, the low levels of affordable housing and the stalling of social mobility. On the latter, the government should be ensuring that poorer students have access to higher education. Instead, the Chancellor has opted to replace university grants with a loan system that is sure to put off many people from going to university, capping their personal potential.

The OBR document accompanying the budget makes a few things clear: productivity figures will be downgraded for each of the next three years whilst at the same time housebuilding will be reduced as a result of Mr Osborne’s decision on social rent reductions. If we are to prosper and take advantage of the best opportunities available to a globalised twenty-first century country such as ours, the government is going about it in the wrong way.

There is something of 'Nixon goes To China' about this budget. If Labour had introduced these measures with the same flippancy and lack of consultation we would have various trade bodies and media outlets down our throats – and rightly so. The last Labour government went about introducing the National Minimum Wage in a measured and consultative manner, yet we had to resist the Conservative’s false and dire warnings of millions of likely job losses. We also had to ensure an all-night sitting to make certain that this enlightened piece of legislation became law.

This is a cruel budget that will strike at the heart of the working family home, and this hubristic Chancellor will continue to throw more like this our way. Labour however, can – and must – overcome his spin, by developing our own separate economic narrative and convince the country that our vision of a prosperous, high-skilled, socially mobile and fair country is one the British public can choose in 2020.

Lord John McFall of Alcluith is a backbench Labour Peer and a former Chair of the Treasury Select Committee. He tweets @McFallJF